That’s Entertainment

In February 2018, Netflix’s CEO, Reed Hastings affirmed the company’s interest and optimism in the Indian market at a panel. He reportedly said that he expected the company’s next phase of growth to come from international markets, especially India, “The next 100 million (subscribers) is from India. We are at 120 million across the world.”

The attractiveness of India in terms of potential numbers is undeniable. It grew to be the second largest Internet user base with over 450 million in 2017. It also grew to have the second largest smartphone market by volume after the US in 2017. Though the average broadband speed in the country is 4.9 Mbps (lower than world average) and penetration of mobile and fixed broadband services is still under 30%, network infrastructure is rapidly improving as a result of concerted efforts by the government of India and telecom operators.

Vidya S. Nath, Senior Director, Frost & Sullivan

This accessibility to broadband has resulted in multiple shifts in the entertainment and broadcast industry – a boom in non-user generated over the top (OTT) video services, expansion of movie distribution outside cinema screens and TVs to online platforms, an explosion in the universe of content creators; and intense competition for the fractured attention of the digital user.

Targeting the Indian Consumer

India has one of the youngest working populations in the world. Brands, consumer applications and content producers are constantly trying to understand the pulse and aspiration of this Gen Y population, but India’s socio-economic framework doesn’t leave any room for generalisation. With over 22 official languages, 29 states and 7 union territories, the country presents an interesting but challenging conundrum in terms of what people relate to and empathise with.

Till 2017, over 80% of OTT platforms were targeted toward English and Hindi content with a limited library of other languages, restraining adoption of OTT platforms by a vast percentage of the Indian demographic. However from 2017 onwards, multiple service providers are driving investment to acquire and produce original productions to expand vernacular content libraries. For example, Zee5, Voot, Hotstar, Amazon Prime Video, Yupp TV, Eros Now and others offer content in Gujarati, Marathi, Tamil, Telugu, Bengali, Kannada, Malayalam, and Punjabi among other languages.

The other trend that has driven a quiet debate between content producers, distributors and regulators is on the type of content. With a large part of OTT viewership driven by individuals on their respective mobile devices, it is not just Youtube, but also OTT platforms such as Alt Balaji, Netflix, Amazon Prime Video, Hotstar, and more recently Zee5 that carry bold and edgy content that would have never made it to the telly. That said companies have realised that titillating content alone is poor in driving adoption of new age platforms. Most successful platforms have a wide library that ensures something for every person in a household, including children.
Monetising Digital Platforms

India still offers one of the most promising advertising markets in the world with growth in both traditional avenues such as television, print, OOH among others, and digital. Digital advertising spend in India has ramped up in growth over the past three years. It gained $1.1 billion in revenue in 2017 and will likely grow at a CAGR of 28.6% to $4 billion by 2022.

Digital video advertising has grown rapidly and contributed over $490 Mn in 2017, according to Frost & Sullivan’s 2018 report ‘P9BC-70 OTT Video Services Market, India’. While there is emphasis on subscription based services, it comprises less than 8% of total revenue from digital video. Clearly advertising is what will fuel the next phase of growth for video entertainment in India.
Multiscreen or Cord-cutting?

Star TV India created history in 2017 by bagging the five year contract of the global television and digital rights of the 2018 Indian Premier League for cricket outweighing Sony and Facebook. Star bet big on IPL to boost the viewership on its digital platform, Hotstar, and it posted remarkable growth. According to Star India, 202 million viewers watched cricket on Hotstar in 2018 growing by 55% over the 2017 series. This demonstrated a new paradigm in viewership behaviour and broke the myth that people watch only on-demand content on their mobile devices while tuning into TV for sports. However, this does not imply a shutdown of TV channels or Pay TV services.

The US$7.5 billion industry comprises over 800 TV channels in India, 7 satellite TV service providers and thousands of cable TV operators offering Pay TV services, according to the national regulator, the Telecom Regulatory Authority of India (TRAI). Yet there is room to grow as TV penetration is at 76%, out of which only 66% of the households have a pay TV subscription. According to the (TRAI), India had nearly 180 million registered digital TV households, out of which Frost & Sullivan estimates about 60% are active subscribers. Despite being a mature market, Pay TV Services continues to grow in revenue, driven by higher adoption of HD services. Pay TV revenue in India is expected to grow at 19% primarily driven by direct to home (DTH) services despite a moderate growth of 4% in active pay TV subscriptions. (Source: Frost & Sullivan’s Pay TV Services in India 2017 report).

Television will co-exist alongside on-demand services. With initiatives from telecom operators such as Reliance Jio and Airtel, there will be rapid growth in connected set top boxes, which will drive the adoption of multiscreen television and video on demand services.
However, every content production house and studio is eyeing the OTT video services market. The $ 543 million market has potential to grow at a CAGR of 40% over the next five years. Since 2015, the number of video-on-demand services have expanded to over 50 legitimate ones including app services by broadcasters and operators including Hotstar, Sony Liv, Asianet, Amazon Prime Video, Netflix, Voot, Zee5, among others.

Tapping broadband potential

One of the downsides of rapid broadband connectivity over the last 24 months is that the market has saturated within its initial targeted audience – the urban demographic. According to the country’s sector regulator, TRAI, the rural Internet density (i.e., the number of Internet subscribers per 100 people) is at 14.89%, compared to 76.76% for the urban population (Source: TRAI Performance Index Report May 2017). This means the next phase of growth will be completely dependent on rural expansion- for both broadband as well as Pay TV.

While satellite TV operators such as Tata Sky, Videocon D2H, and Dish TV have made significant inroads over the last decade, competition is set to intensify as MSOs and telcos will push hybrid boxes offering video distribution over IP. Reliance Jio is eyeing this market next.

In the latest annual general meeting in July 2018, the company announced its intent to drive up its market share in fixed broadband and home entertainment. The growth for the broadcast and OTT video services in India will be multi-fold. One, Pay TV services will continue to grow in smaller towns and villages, HD penetration will increase, even if a small percentage of urban viewers will transition to broadband connected services. Two, OTT video services will increase rapidly riding on the back of high speed mobile broadband penetration and vernacular content offerings, but sustaining viewers on such platforms will depend on quality of service and experience. Three, there will be growing partnerships across the value chain resulting in bundled offerings from Pay TV operators and telcos. Finally, Indian content distribution will expand beyond regular Bollywood fare. Worldwide releases of originals such as Sacred Games by Netflix (with marquee star cast- Saif Ali Khan and Nawazuddin Siddiqui), will give both Indian and international viewers great content to chew on with their popcorn. Vidya S. Nath is Senior Director, Frost & Sullivan ●